Don't abolish the charities commission

Posted by Andrew Leigh Mp48sc on December 04, 2014

Yesterday the government finally brought the bill to abolish the Australian Charities and Not-for-profits Commission forward for debate. I kicked things off for the Opposition by explaining exactly why we need to keep this important, effective agency.

That all words after “That” be omitted with a view to substituting the following words:

“whilst not declining to give the bill a second reading, the House is of the opinion that the Government’s plan to abolish the Australian Charities and Not-for-profits Commission is an insult to the good work of the charitable sector, and to all Australians who want accountability and transparency when it comes to their generous donations.”

What the charities commission does

Let me start with a story of great concern. It is about some scammers who set up charities with names such as Friends of the Disabled Children's Task Force, Friends of the Underprivileged Children's Task Force, and Chronic Constructive Pulmonary Disease of Australia Incorporated. Australians, inspired by a deep sense of generosity, donated more than $1 million to them. It turned out that there was not much evidence of the money going to the disadvantaged or needy, and those charities have now been shut down.

All scammers are dodgy, but I have always regarded charity scammers as a particular form of low-life. Other scammers exploit greed or lust or ignorance, but charity scammers prey on our goodwill; they take that great Aussie tradition of wanting to help the vulnerable, and they use it to line their own pockets.

Cracking down on scams was one of the main reasons Labor set up the Australian Charities and Not-for-profits Commission in 2012. Before we established the commission, Australians had no central register to find out whether a charity was dodgy or legit. Now if someone comes to your door asking for money, you can jump onto www.acnc.gov.au and check them in an instant.

And the charities commission is proactive when it comes to dealing with scammers. Earlier this year it deregistered two Western Australian groups after a five-month investigation showed that their 'benevolent' work was a sham.

The work of the Australian Charities and Not-for-profits Commission in cracking down on scammers has been first-rate. They received over 200 complaints in their first year, including 48 for fraud or criminal activity. Cracking down on scammers is absolutely vital, because, if we do not, we not only hurt those who donate but also sap the goodwill of others who might donate to a good charity but are too concerned that it might be dodgy.

Charities are fundamental to the Australian way of life. Charities in the not-for-profit sector employ more than one million Australians, generate almost five per cent of GDP and turn over about $1 billion a year. As David Crosbie has put it:

“The ACNC is important to how charities do business, yet the Government chooses to ignore the majority of charities in deciding what it will do.”

Since its inception, the charities commission has seen more than one million hits on www.acnc.gov.au. According to their six-month report, average registration time for charities was 11.4 days. In the first six months they had answered 14,500 phone calls, responded to 6,900 written inquiries and registered 500 new charities.

The benchmark for the charities commission and the tax office to decide on tax concession status was 85 per cent within 28 days, but the charities commission has significantly exceeded that, reaching a level of 95.6 per cent of charities whose tax status had been determined within 28 days. As David Crosbie notes:

“The ACNC is more efficient than the government regulators it replaced, is doing good work and deserves a chance to achieve its three goals of reducing red tape, increasing public trust and strengthening the charities sector.”

In the case of Indigenous charities, the charities commission is playing a particularly important role. The ACNC employs two Aboriginal liaison officers to provide assistance to customers of Aboriginal and Torres Strait Islander descent who might prefer to liaise with staff from an Aboriginal background. Axing the ACNC would hurt Indigenous charities.

The charities commission has launched the Charity Passport, a secure online system to save charities from reporting the same information to multiple government agencies. As ACNC commissioner Susan Pascoe, about whom no-one seems to have a bad word—even those who want to scrap the charities commission—has noted:

“A single charity that conducts fundraising across the country, and receives government grants, may need to report to more than 10 different government agencies. The Charity Passport is the key to the ACNC’s ‘report once, use often’ framework, cutting down the amount of time charities spend on duplicative reporting to government. Through the passport, we can securely share information the ACNC collects from registered charities with authorised government agencies.”

The Charity Passport has been tested by two government agencies, and the charities commission is encouraging more government departments to sign up.

The Charity Passport is being deployed in two phases: the first using a file transfer protocol repository; and the second phase, scheduled for implementation around now, involving integration with agencies' IT systems.

How the ACNC came into being

The history of the charities commission is a long one. There were external inquiries encouraging the federal government to set up something akin to the charities commission in 1995, 2001 and 2010. There have been parliamentary committee reviews, issues and discussion papers, exposure drafts and consultations with experts.

Indeed, the Australian Taxation Office, in a submission to a parliamentary inquiry as far back as 2001, said as follows:

“It is also our view that administration would be better served by a single independent common point of decision making on definitions leading to conclusions about whether organisations are charitable or non-profit, such as occurs with the Charity Commission in the UK, for example.”

A bipartisan parliamentary report in 2006 by the House of Representatives Committee on Legal and Constitutional Affairs recommended:

The Committee recommends that the Australian Government, in consultation with the not-for-profit sector and the States and Territories: investigate the establishment of a single national regulator for the not-for-profit sector.

That is a House of Representatives committee report commissioned by the member for Berowra. It was a bipartisan committee report, and one of those who signed off on it was the shadow Prime Minister—sorry, the Prime Minister's shadow—the member for Wentworth. The member for Wentworth then thought that the charities commission was a very good idea, as every sensible contribution in this sector does.

The Productivity Commission inquiry, chaired by Robert Fitzgerald, who I will refer to later, said:

“Corporate Australia long ago rejected such a regime and begs the question as to why the not -for-profit sector should be burdened by such a cumbersome regime?”

Consultation

In the process of bringing the ACNC into being, Labor's shadow Treasurers, including the now Leader of the Opposition and the then member for Lindsay, David Bradbury, engaged extensively with stakeholders and addressed those stakeholders' concerns systematically.

Where religious institutions were concerned about the impact on small parishes who had few personnel and little income, it was addressed by providing a financial and governance exemption for basic religious charities. Where schools wanted to ensure that they would not have to report twice to the charities commission, this was addressed through an agreement that avoided duplicate reporting.

Charities incorporated as companies limited by guarantee wanted to ensure that they did not have to annually report to both ASIC and the ACNC, so the arrangement to report once was put in place. Certain philanthropic funds did not want their details published to avoid unsolicited requests, so the commissioner exercised her discretion to ensure that nondisclosure of key information can occur.

Information provided by Indigenous organisations to the Office of the Registrar of Aboriginal Corporations is sufficient for ACNC services.

So the process of setting up the charities commission was a highly consultative one—one which involved a great degree of engagement with the charitable sector. This stands in stark contrast to the lack of consultation from this government.

It has to be said that the government is not moving quickly on this bill. By my count, it has been 253 days since the minister gave his speech attempting to scrap the charities commission. In that 253 days, the minister has engaged in frighteningly little consultation with the sector.

The Department of Social Services was asked in the Senate estimates committee who it had consulted with over the charities commission repeal. It named a number of bodies. One of these was the Governance Institute of Australia. They were a bit surprised that the minister had been suggesting that he had consulted with them. They said, in their letter dated 30 May 2014:

“This is misleading. Governance Institute has not at any time been consulted by the Department of Social Services. A representative of Governance Institute attended a forum organised by Melbourne Law School had which staff members representing the Department of Social Services were also present.”

That is their idea of consultation: 'We were in the same room as you, so we consulted you.' That is not consultation. Justice Connect wrote in similar terms:

“We were surprised and concerned to see the name of our organisation, Justice Connect, on a list of 'organisations DSS had consulted about the ACNC'.

We understand that we were listed by the DSS because a representative from our organisation attended a Melbourne Law School event on the future of charity regulation, which was also attended by DSS representatives and Minister Andrews' adviser. Let us be clear, the minister was not in the room. His adviser was in the room. And they call that consultation!”

Justice Connect also said:

“We therefore request that the record be corrected to indicate that we have not been consulted, despite specifically requesting this opportunity.”

So the minister is rejecting attempts by worthy organisations to consult and is then going away and telling the Senate that he has consulted with them. Part of the failure to consult occurs because the charities commission issue has not been placed in the hands of the Assistant Treasurer—of course, the Government does not have an Assistant Treasurer—it has been placed in the hands of Minister Andrews.

As John Butcher from the University of Canberra puts it: “Thus far the field appears to have been abandoned to ideological considerations and, seemingly, the privileged voices of a small number of organisations that have the ear of Minister Andrews.”

Support in the charitable sector

I turn now to the support that the charities commission enjoys within the sector.

The 2014 Pro Bono Australia State of the Not for Profit Sector Survey found that four out of five not-for-profits stated that the charities commission was important to a thriving charities sector. Only six per cent agreed with Minister Andrews that the charities commission should be scrapped and responsibility for regulating charities returned to the tax office.

Even the National Party gets more support than that.

Indeed, the Pro Bono survey was conducted in both 2013, before the election, and 2014, after the election. So, after trawling the country, what has happened to popular support for the charities commission? Let me quote from page 25 of the Pro Bono 2014 report:

“The support for the ACNC is substantially higher than what was reported in the 2013 Election Manifesto Survey.”

Every time they go out to charities and tell them what they think about the charities commission, support for the charities commission goes up and support for this Government goes down. The charities commission is popular and is becoming more popular. This Government is unpopular and is becoming less popular by the day.

I spoke before about the extraordinary ACNC Commissioner, Susan Pascoe, who has walked a very difficult road in this process. She spoke about the process that involved setting up the charities commission. As she put it:

“In setting up the ACNC, we had the privilege of being able to draw on lessons learned by international charity regulators.

… … …

“We are now in a position where we have actually been able to leapfrog ahead of other regulators …”

Robert Fitzgerald was the presiding commissioner on the Productivity Commission's 2010 inquiry. You might hear from members opposite that the Productivity Commission did not recommend the charities commission. That is certainly not the view of the head of that inquiry who says:

“Retaining the ACNC is in the public interest. It is in the best interests of the sector, community and government. Its removal benefits those opposed to public accountability and transparency, without delivering real gains in reducing inefficient regulatory burden.”

Mr Fitzgerald goes on to say:

“… the key beneficiaries of the repeal of the ACNC are really only those organisations who do not want independent public accountability or transparency but which seek to continue to receive large benefits from the Australian community. All of the failings in the past regulatory regime identified so often and in so many inquiries would remain and be entrenched. The opportunities offered by the establishment of a one-stop regulator would be forgone. Independence from the Australian Taxation Office will be abandoned, allowing identified conflicts to persist. The sound, well-functioning and efficient agency, highly respected by much of the sector with considerable expertise and experience will be abolished.”

David Crosbie, the CEO of the Community Council of Australia, has said:

“The ACNC is important to how charities do business, yet the Government chooses to ignore the majority of charities in deciding what it will do.”

World vision CEO, Tim Costello, says:

“The commission is actually working for us, and it gives the public confidence.”

He is speaking there about the confidence in the spending of the donations. Ann O'Connell and Matthew Harding, two academics who have carefully engaged with this issue, have said that repeal of the charities commission:

“… means a loss of understanding of context. The very talented staff employed by the ACNC, and their range of skills to deal with charities and charity law will be lost.”

They pointed out that it will be detrimental to the collection of data relating to the not-for-profit sector.

Max Bourke who has spent some 30 years in senior executive services and as a chief executive of several statutory authorities, including the Australian Heritage Commission, and has had a significant role in encouraging philanthropy, having chaired boards of the Myer Foundation, the Nature Conservancy, the Thomas Foundation, and the Australian Environmental Grantmakers Network, has said:

“This proposal to repeal the ACNC Act and abolish the regulator is a most retrograde step and is to be deplored. There is no doubt it will increase the potential for fraud and I imagine fraudsters relishing the prospect.”

Young Australia League Incorporated chairman, Frank Schaper, writes to me: “Like many, I have never understood the rationale that supports the proposal to abolish such an important instrumentality that has brought a level of much needed transparency to the charitable sector.”

“… we do not see how its abolition, nor any of the options outlined in this paper, will assist in achieving the outcomes above.”

The Government's proposal does nothing to reduce the duplication of reporting that organisations face.

The Prime Minister promised he would bring Australian together, and on the issue of the abolition of the charities commission, he seems to have succeeded in that goal!

More than 50 organisations have been brought together by the Prime Minister to oppose scrapping of the charities commission they had taken the brave step of writing open letter to the Prime Minister. You know how brave that is, because we know from the experience of the Howard government that these are people who go after charities that speak out to them. Just look at what is happening in the aged sector right now.

“We want to make very clear to the Commonwealth government and wider community that like most charities across Australia we value the Australian Charities and Not-for-profits Commission and we want to see it continue its impressive work.”

Submissions to the Senate's inquiry into the charities commission were overwhelmingly in favour of keeping the commission. An analysis of those submissions by Andreas Ortmann of UNSW estimates that support for the repeal bill clocks in at fewer than 10 per cent of the submissions. Professor Ortmann also notes it is not quite clear how many of the supportive contributions are commissioned pieces. Some clearly are.

There are a range of submissions that speak very clearly to the damage done if this Government were able to abolish the charities commission. The Shepherd Centre says that repeal:

“… would increase the current workload on charities and forego the opportunities for future savings in workload.”

Australian Women’s Health Network says:

“The ACNC, in a short space of time, has achieved much and engendered trust and goodwill in implementing its objects and functions in terms of the ACNC Act.”

Associated Christian Schools calls retention of the ACNC:

“A positive step forward in initiating the simplification of compliance and red tape.”

The Uniting Church in Australia National Assembly said abolition “will impose considerable distress and probable further costs”. National Disability Services supports the retention of the ACNC model. CPA Australia is deeply concerned that the Government has not said what might come after abolition of the charities commission. Neumann and Turnour lawyers say:

“The sector needs stability.”

St Vincent de Paul Society says:

“Rather than abolishing the ACNC, the Society believes that the Government would be well-advised to listen to the voices of the charitable and NFP sector.”

World Vision Australia says:

“In FY 13 it spent in excess of 13,000 hours in fulfilling reporting obligations to other government departments and agencies (at both the Commonwealth and state level), most notably, grant acquittal and reporting obligations to DFAT (formerly AusAID).”

And they are concerned that burden will increase, not decrease, if the Government gets its way. Anglicare Australia has called the abolition of the charities commission “backward steps on independent regulation of our sector.”

Professor David Gilchrist, Director of the Not-for-profit Initiative at Curtin University says:

“A silent majority in Western Australia think the ACNC is the best way forward.”

This Government has a lot to say about red tape. They are in favour of one-stop shops for universities. They are in favour of one-stop shops for environmental regulation. But when it comes to a one stop shop for charities, they are against it. As Michael Pascoe has put it, “Andrews’ public stance was only that another regulator was being created by Labor, therefore it must mean more red tape and more public servants, and therefore should be taken out and shot.”

A report from Ernst and Young has noted:

“A core component of the Australian charities and not-for-profit commissions reporting framework and efforts around reducing red tape is the 'report once use often' principle.”

This principle is consistent with recommendations issued by the Productivity Commission, the National Commission of Audit, the Australian National Audit Office, the Treasury and the Department of Finance. The Ernst and Young report concludes:

“… can be of particular value in reducing duplication associated with government grants.”

An anonymous submission that came to me from somebody who runs a small not-for-profit incorporated association in Australia says:

“All of the previous 20 millimetres of hard copy paperwork (much of a double sided!) we had started with from September 2013, and which, in frustration, had been pushed to one side as something we would 'get around to' is now with ACNC reduced to one only online application. Unbelievable slashing of red-tape and this is the organisation the Government wants to dump and go backwards to pieces of paper!”

They refer to the old system as creating mountains of paperwork.

I pay tribute to Andrew Barr, Deputy Chief Minister in the ACT, and Gail Gago, charities minister in South Australia, who are working with the charities commission to allow them to be a ones-stop shop, to reduce reporting duplication across jurisdictions. But those opposite are all over the shop when it comes to one-stop shops. Those opposite say that they are in favour of a simple portal that will allow information exchange. Yet, what they are missing is that such a portal would be supported by the charities commission.

In the United States, cash-strapped US state attorneys-general collectively decided to ask philanthropic backers and academic institutions to build them a single electronic portal, to allow once-only entry of fund-raising returns, for multiple state regulators, to reduce red tape for charities and improve their ability to detect fund-raising fraud. Myles McGregor-Lowndes from QUT points out it is ironic that this Government wants to scrap the charities commission while, in the US, innovative states are looking to philanthropy to support it.

While it speaks a lot about red tape, the regulatory impact statement for this bill is deeply flawed. The Queensland Law Society in their submission to the Senate inquiry has noted that the Government's process of introducing a bill that does not say what is to follow it is, in their view:

“… somewhat problematic, given the current Government's intention to reduce obsolete legislation on the statute books by adopting a two-stage legislative process.

They said you do not know what is going to follow the charities commission:

“Such a convoluted legislative process inevitably creates uncertainty amongst charities as to their future obligations to and reporting requirements for the Commonwealth government.”

The Queensland Law Society said:

“Informed debate on the No. 1 Bill”—and that is the only bill we have seen—“is effectively impossible as many of the issues necessarily raised cannot be considered in isolation, and cannot be adequately addressed without a analysing the No. 2 Bill. This appears to add "red tape" to a sector already suffering from reform fatigue.”

The Queensland Law Society describes the explanatory memorandum and the regulatory impact statement as being:

“… less than rigorous, and not meeting the usually high standards and disciplines of Commonwealth legislative processes.”

They referred to the regulatory impact statement, saying it:

“… erroneously refers to the abolition of the New Zealand regulator; the charities regulator still exists in new Zealand, but in a different from, as Charities Services.”

These flaws in the regulatory impact statement and the explanatory memorandum are of deep concern to this side of the House.

What comes next?

What comes after it? We do not know. In the bill it just says, in section 3:

The successor agency is the agency specified in a determination under subitem (2).

This may be made by the minister at a time of his choosing.

The minister has been unwilling to speak to the sector about what will follow. He has spoken about having all kinds of portals. In a pre-election debate, he said:

“And what the Shadow Treasurer Joe Hockey has said is we are looking carefully at the tax office with one of the proposals on the table to actually split the functions of the tax office to that policing function, that regulatory function of the tax office would be separate from the other functions of the tax office.”

That sounds to me a lot like putting a charities commission inside the tax office. If that is what the minister wants to do he can come clear to the House. Charities rating agencies can play a part. Centres of excellence can play a part—but only if they build on the charities commission, rather than smashing the charities commission.

Conclusion

This is a bill that is being brought forward by a government that is trying to get rid of the definition of charities. This Government was fighting early in its life to send charities back to 400-year-old common law in deciding what would be the definition of a charity. They literally wanted to put charities back to the pre-Enlightenment era, the pre-Protestant era, the pre-electric light era and the pre-steam train era. They want a take charities back to a time of leaches and witch burning.

You only have to listen to, for example, John Howard. He said:

“… the common law definition of a charity, which is based on a legal concept dating back to 1601, has resulted in a number of legal definitions and often gives rise to legal disputes.”

The Government failed in its attempt to take charities law back to the 1600s. I sincerely believe that they will fail in their attempt to scrap the charities commission.

As Michael Pascoe has noted: “The fate of the ACNC could be a small but telling indicator of whether the coalition can successfully make the change to being a responsible and reasonable government.”

They should keep the charities commission. That is what the Senate believes. It is what the sectors believe. They should stand on the side of charities and not on the side of fraudsters and scammers.